Prime Minister's Economic Advisory Council (PMEAC)’s chairman C Rangarajan expects country’s current account deficit (CAD) to be around 2% of the gross domestic product (GDP) in the coming few years, on the back of reduction in import of gold and some signs of decline in inflation. He further emphasized that, while exports picked up, imports slowed down not only in relation to gold but also in context with oil.
Additionally, the former RBI Governor pointed that with inflation showing signs of decline and gold prices also not rising, the attraction of gold as an asset has come down, something which reflects in the reduction of gold import.
Finance Minister P Chidambaram, while tabling the interim budget had pegged CAD at $45 billion this financial year, well below the $88 billion level in FY'13. In the first half (April-September) of the financial year, CAD narrowed to $26.9 billion or 3.1% of GDP from $37.9 billion or 4.5% of the GDP in the same period last fiscal.
Both the government and the Reserve Bank of India (RBI) took slew of steps to bring down gold imports, one of the major causes for the widening of the CAD in 2012-13. However, on relaxation of administrative restrictions imposed on gold import, Rangarajan said that these may be reversed, given that prices of the yellow metal have stabilized. Both, gold and silver imports shrank by 40% to $33.46 billion in 2013-14, or just 7% of total import bill, against 11% in the earlier fiscal, after the government put in place steps to check their runaway imports.
